Federal Program Information
Federal Agencies: Department of Health and Human Services (“HHS”)
Pass-Through Entity: Virginia Department of Health
Pass-Through Entity Number: INORWB611-GY22; INORPS611-FY23; INORWB611-GY23
Awards: Assistance Listing Number 93.917 – HIV Emergency Relief Project Grants (Part B)
Assistance Listing Number 93.918 – Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Part C)
Award Periods: April 1, 2022 to March 31, 2023; July 1, 2022 to March 31, 2023; April 1, 2023 to March 31, 2024
May 1, 2022 to April 30, 2023; May 1, 2023 to April 30, 2024
Description: Timely Application of Program Income Prior to Requesting Additional Cash Payments
Type of Finding: Material Weakness in Internal Control Over Compliance
Criteria
In accordance with Title 2 U.S. Code of Federal Regulations, Part 200.303, Internal controls, “Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.”
Per the terms and conditions of the pass-through entity agreement between the Virginia Department of Health (the Department) and the Inova Juniper Program (IJP), IJP is required to follow Health Resources and Services Administration (HRSA) guidelines related to the program. HRSA develops multiple policies to help grant recipients and subrecipients understand and carry out legislation applicable to Ryan White programs.
Per the Policy Clarification Notice included on the official HRSA website for Ryan White, “Under the uniform administrative requirements, to the extent available, recipients and subrecipients must disburse funds available from program income, rebates, refunds, contract settlements, audit recoveries and interest earned on such funds before requesting additional cash payments.” As such, program income must be used for the purpose and subject to the conditions of the Federal award.
The requirements within the pass-through entity agreement with the Virginia Department of Health are consistent with those required by the original Federal awarding agency, the Department of Health and Human Services (HHS), HRSA. Per the frequently asked questions (FAQs) presented by HRSA’s HIV/AIDS Bureau (HAB) for Policy Clarification Notice (PCN) 15-03, Clarification Regarding the Ryan White HIV/AIDS Program and Program Income, and PCN 15-04, Utilization and Reporting of Pharmaceutical Rebates, released on March 21, 2016, program income is gross income earned by the non-Federal entity that is directly generated by a supported activity or earned as a result of the Federal award during the period of performance (or grant period). Program Income, inclusive of program income derived from the 340B Drug Pricing Program, includes the core medical and support services that HRSA considers allowable uses of Ryan White grant funds and the individuals eligible to receive those services. Unallowable uses include PrEP/nPEP materials, which are designed to promote or encourage, directly, intravenous drug use or sexual activity.
Condition
The System did not have appropriately designed internal controls in place to ensure that program income was not applied to offset expenditures prior to requesting additional cash reimbursements each month and/or quarter during the grant period.
The cash management submissions and financial reporting for Assistance Listing – 93.918 Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Part C), including the quarterly Federal Financial Reports and annual SF-425 Federal Financial Reports, included the incorrect 340B program income during the period, which included unallowable uses of PrEP/nPEP materials.
Cause
IJP has policies and procedures in place to ensure program income was not applied to offset expenditures in its entirety prior to the end of the grant period. However, during the grant period, program income is not timely applied prior to cash reimbursement requests.
IJP accumulates 340B program income on a monthly basis inclusive of the pharmacy income and related costs. Through management review of the costs associated within the 340B program, it was identified that PrEP/nPEP materials were inappropriately being included within program income.
Effect or potential effect
IJP did not have policies in place to ensure that program income was applied timely prior to requesting additional cash payments. As such, cash payments were being requested and reimbursed prior to application of program income.
Program income was not appropriately being calculated by including unallowable uses.
Questioned costs
None.
Identification of a repeat finding
This is not a repeat finding.
Context
During our audit, we selected a sample of 4 months for testing, which identified that program income was not timely being applied to the cash reimbursement requests. Management does ensure that program income is applied prior to the end of the grant period.
As of December 31, 2023, for Assistance Listing Number 93.917 – HIV Emergency Relief Project Grants (Part B), the cumulative program income not applied prior to cash reimbursement was $109,593. This was not identified as questioned costs given this was subsequently applied by the end of the grant period.
As of December 31, 2023, Assistance Listing Number 93.918 – Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Part C), for the cumulative program income not applied prior to cash reimbursement was $84,064. This was not identified as questioned costs given the program income was subsequently applied by the end of the grant period. As of December 31, 2023, the unallowable PrEP/nPEP materials caused an overstatement of 340B program income by $484,569. This amount was appropriately adjusted within the Schedule. As such, there were no identified question costs.
Recommendation
IJP’s existing policies and procedures are not designed to ensure the program income balance is spent timely. HRSA recommends that recipients and subrecipients strive to proactively secure and estimate the extent to which program income will be accrued. IJP should accrue for the anticipated program income to ensure it is disbursed timely.
IJP should reconcile 304B expenditures to the 340B program income to ensure there are no additional expenditures reported over the amount for 340B program income allowable.
View of responsible officials
Management concurs with the finding and will implement procedures to ensure that the appropriate and timely application of program income.